A Settlement Established on 15 January and Known as the H Trust

• Jurisdiction: Bermuda
• Judge: Hargun
• Judgment Date: 30 April 2019
• Neutral Citation: [2019] SC Bda 27 Com
• Court: Supreme Court (Bermuda)
• Docket Number: CIVIL JURISDICTION
• Date: 30 April 2019

In the Matter of a Settlement Established on 15 January and Known as the H Trust

And in the Matter of the Trustee Act 1975

And in the Matter of Order 85 of the Rules of the Supreme Court

[2019] SC (Bda) 27 Com

Before:

Hon. Chief Justice Hargun

CIVIL JURISDICTION

2019: No. 003

In The Supreme Court of Bermuda

Appearances:

Mr Keith Robinson, Carey Olsen Bermuda Limited, for the Plaintiff

RULING

Introduction

1 This is an application by Butterfield Trust (Bermuda) Limited, as trustee of the H Trust (“the Trustee” and “the Trust” respectively) for the following orders:

First, a declaration that Mr P is not a Protector of the Trust on the ground that his purported nomination as successor Protector by one of the original Protectors acting unilaterally contravened the requirement within the Trust Deed, that this power of nomination be exercised by the original Protectors acting jointly.

Second, an order appointing Ms M and Ms G as Protectors of the Trust under the Court's inherent jurisdiction to appoint persons as protectors, where there is a vacancy which cannot be filled by the machinery created by the relevant trust instrument, in order to ensure the proper exercise of the fiduciary powers vested in the office of protector by the trust instrument.

Third, an order conferring on the Trustee the power to amend the Indenture of Settlement dated 15 January 1990 (“the Trust Deed”) pursuant to Section 47 of the Trustee Act 1975 (“the 1975 Act”) on the ground that the variations intended to be made are within the broad scope of Section 47 and are plainly expedient.

2 The factual background to these applications is taken from the two affidavits of Catherine Smith sworn on 13 December 2018 and 11 March 2019 respectively.

Validity of the appointment of Mr P as successor Protector

3 The Trust Deed makes the following provisions in relation to the appointment of original and successor Protectors:

“ SECOND: TRUST PROTECTORS. The provisions regarding the appointment and retirement of the Protectors and successor Protectors and the powers of the Protectors are as follows:

2.01: DESIGNATION OF ORIGINAL AND SUCCESSOR PROTECTORS

The original and successor Protectors shall be those persons named in the Fourth Schedule hereto. Each of the original Protectors shall as such serve from the date of this Settlement until his death or withdrawal from office. The Protectors serving from time to time under this Settlement may designate any person to succeed them as Protectors in case of their death or withdrawal from the office of protector, and they shall have the power to revoke such designation and make a new designation so long as they are acting as Protector. The last person so designated as successor Protector (if any) shall qualify to serve as successor Protector only if none of the persons named in the Fourth Schedule hereto shall be willing and able to serve as Protector. If such a named successor shall be willing and able to serve, such person shall qualify to serve and commence service as Trust Protector upon the death or withdrawal of the previously named Trust Protector. Upon qualifying as a Protector, each successor shall have the same power to designate a further successor and to revoke any such further designation. Each such designation or revocation shall be made by written notice delivered to the Trustee. Any Protector may withdraw from office if there is then appointed a successor Protector who is willing and able to serve…”

4 The Fourth Schedule of the Trust Deed provides as follows:

“The Original Trust Protectors and the successive, successor Trust Protectors who shall serve pursuant to the terms of the above written Settlement are as follows:

Original Trust Protectors: Mr. F and Mr. W (to act jointly as one or, if one of them ceases to serve as Trust Protector, the remaining person to act alone)” (emphasis added).

5 Pursuant to a Designation of Successor Trust Protector dated 8 May 1997, Mr W purported to appoint Mr R as successor Protector. Mr R accepted that designation, and on 28 May 1997, by way of Resignation of Trust Protector, Mr W resigned as Protector.

6 Pursuant to a Designation of Successor Trust Protector dated 23 May 2002, Mr R purported to appoint Mr P as his successor Protector. Mr P accepted that designation, and on 31 May 2002 by way of a Resignation of Trust Protector, Mr R purported to retire as Protector.

7 Mr F died on 30 March 2011. It is not known whether Mr W is still alive.

8 In the circumstances, the Trustee raises the question as to whether Mr P has been validly appointed as successor Protector. I agree with the submission made on behalf of the Trustee that having regard to mandatory provision requiring the Protectors to act jointly, the purported appointment by Mr W of Mr R as the successor Protector must be invalid and the subsequent purported appointment by Mr R of Mr P as a successor Protector must also be invalid. As noted above, the Fourth Schedule sets out that the Original Protectors (Mr F and Mr W) must act jointly as one. In the circumstances the unilateral actions of Mr W in purportedly appointing Mr R as the successor Protector was not in accordance with the provisions of the Fourth Schedule and any purported appointment was invalid. The purported appointment by Mr R of Mr P was also invalid on the ground, inter alia, that Mr R was not validly appointed as successor Protector and had no authority to make any such appointment.

The appointment by the court of Ms M and Ms G as Protectors of the Trust

9 In relation to this application, the Trustee points out that there is no power to appoint a Protector in the Trust Deed other than under section 2.01 of the Second Article set out at paragraph 3 above. The appointment of a new Protector is now impossible to achieve due to the death of Mr F. In the circumstances, the Trustee seeks to remedy this deficiency by applying to the Court to exercise its inherent jurisdiction to appoint two new Protectors.

10 Mr Robinson, appearing for the Trustee, submits that the Court has inherent jurisdiction to appoint protectors in certain circumstances where the trust instrument makes provision for such an office. I consider that this submission is well founded and is supported by the commentary at 3.42 of Holden, Trust Protectors (Jordan 2011) and the decision of the Manx Court (Hegarty JA and Smith JA) in Rawcliffe v Steele [1993–95] 426.

11 In Rawcliffe v Steele the court held that it had the power in principle to remedy the defect caused by the failure to appoint the protector. Hegarty JA outlined the scope of the jurisdiction at 503 in the following terms:

“It seems to me that, once a power is categorised as a fiduciary power, the donee of the power is in a...